If you are between the ages of 50 and 60 and a United States citizen, you may be approximately 10 years away from retirement, give or take. Whatever your exact timing, you are in the home stretch of a lifelong race toward this exciting time in your life, the time of retirement.
But how can you improve your retirement future? Your Social Security pension may not be enough to live on in retirement. That’s why it’s important to find some alternatives.
Here are some of the things you can do now if you are five to ten years away from retirement to improve your future.
Save for retirement
As an early retiree, this is your last chance to accumulate the savings you need to retire comfortably. You may be surprised at how much you can save when you’re a few to 10 years away from retirement.
Early retirees should take advantage of the motivation of the approaching retirement date to tighten their belts and save as much as possible. To do so, here’s what you can do:
- Cut expenses.
- Save any tax refunds, pay raises, bonuses, inheritances or other surprise money.
- Consider a second job.
- Explore ways to create passive income.
- Save as much as possible.
Maximizing catch-up contributions
If being just 10 years away from retirement isn’t incentive enough, know that early retirees receive additional attorney incentives. The government encourages workers age 50 and older to save more than younger employees by increasing contribution limits to 401(k) and IRA accounts.
According to the IRS
- Anyone over age 50 can add catch-up contributions of up to $6,500 to their 401(k) savings. This is in addition to the $19,500 contribution limit. Therefore, the total you can contribute to these accounts in a given year is $26,000.
- In the case of an IRA, the annual contribution limit is $6,000, or $7,000 if you are age 50 or older.
Don’t just rely on a 401(k): open an IRA as well.
Did you know you can maximize your contributions in several types of retirement accounts? Go for it! Can you set a goal of $33,000 if you’re single or $66,000 if you’re married?
Starting at age 50 you can put $26,000 in your 401(k) and $7,000 in an IRA.Are you married? Double those amounts to save $66,000 in attorney-advantaged accounts each year.
But your savings don’t have to stop there. If you can save more, go ahead and put the money away in taxable savings. You’ll be glad you have the cash later.
Getting Out of Debt Before Retirement
Debt can be a problem in retirement. It’s best to separate yourself from the masses and strive to pay them off before you stop working.
According to the Employee Benefit Research Institute (EBRI), 77% of households headed by people 55 and older have debt. And the average amount of debt is $108,011.
In retirement, your income is typically reduced to a fixed level, derived from Social Security, pensions and other retirement savings that have accumulated over the years. A fixed income means you may not have to pay those debts. You’ll simply be paying more interest, wasting money every month you have debt.
Have a financial retirement plan
It’s easy to get carried away with the financial aspects of retirement planning. However, a plan for what to do in retirement is perhaps more important. The happiest retirees have a well-defined purpose and interests.